Trump Is Right to Ban Predatory Student Loans for Low-Paying Degrees

Liberals are losing their minds this week over a new Department of Education rule that will restrict access to federal Direct Loan assistance for degree programs that fail to produce a sufficient return on investment. This long-overdue move from the Trump administration will finally force some accountability from universities that have been setting up students for a life of financial hardship.

The regulation is formally known as the “Student Tuition and Transparency System (STATS) and Earnings Accountability rule.” Its basic premise is straightforward: colleges that want continued access to federal student loans must demonstrate that their degrees leave graduates financially better off than people who never earned those degrees.

Undergraduate programs will generally have to show that their graduates earn more than comparable workers with only a high school diploma. Graduate programs will have to show that graduates earn more than comparable workers with a bachelor’s degree. If a program fails that earnings test in two out of three consecutive award years, it loses eligibility for the federal Direct Loan program.

The Federal Direct Loan Program is the federal government’s primary student-loan system. It includes Direct Subsidized Loans, under which the government pays interest during certain periods, as well as Direct Unsubsidized Loans, for which borrowers generally pay all accruing interest. Both are loans made directly by the federal government.

Notably, the rule does not ban any degree program, nor does it prohibit a student from attending a school whose program fails the test. A program that loses Direct Loan eligibility could still enroll students, and those students could still take out private student loans or pay for the degree themselves.

In other words, the administration is not outlawing degrees it considers insufficiently lucrative. Instead, it is establishing a threshold for when the federal government will continue lending taxpayer-backed money to students pursuing those degrees.

The Trump administration rightly recognizes that the current federal student loan program has a grossly misaligned incentive structure. As soon as a student takes out a federal loan to go to college, the school’s customer becomes the U.S. government, not the student himself.

If schools had to lend to students directly, they would have a vested interest in ensuring that those students can obtain jobs that allow them to pay back the loans. But that is not the case. The government pays schools on the front end through federally backed loans. If a student is unable to pay back his loans because his degree can’t land him a job that pays well enough to do so, it is the government – and by extension the taxpayers – that is on the hook.

Universities are thus motivated to keep raising tuition, so long as they know the government will keep raising the amount it is willing to allow students to borrow. And raise it they have. Adjusting for inflation, the cost of college has increased a staggering 312.4 percent since 1963, right alongside the amount that the government has lent to students. Meanwhile, a college degree has only become less valuable.

Advocates for arts and humanities programs that statistically have the worst return on investment cry that the new rule will restrict access to those degrees. But that is not necessarily the case.

As The Wall Street Journal reported earlier this year, many MBA programs are now slashing tuition after Congress placed a $100,000 cap on the aggregate debt that graduate students can take out. “This reinforces that universities respond to government incentives like any business,” the Journal Editorial Board wrote. “For too long those incentives encouraged colleges to raise prices and bury students in debt.”

The total outstanding federal student loan debt in the United States today is approximately $1.86 trillion, shared among 42.6 million borrowers for an average balance of about $40,467. Federal loans make up 91 percent of that total. Roughly 10 percent of those loans were 90 days or more delinquent as of mid-2026.

But as the Trump administration correctly recognizes, that debt is not shared equally between degree programs. In-demand fields like the sciences can land graduates good-paying jobs that enable them to pay back loans quickly, while graduates from many arts and humanities programs struggle to find such opportunities.

To be clear, it’s not that degrees in fields like music and the arts aren’t important. One of the primary functions of the university system is to produce scholars who carry on the artistic and cultural legacy of Western Civilization (although many arts and humanities departments sadly have completely abandoned that responsibility). But burdening students with exorbitant amounts of debt for those degrees is not only economically inefficient; it is morally wrong.

Federal student loans were supposed to make a college degree – and subsequent higher earning potential – more attainable for high school students who come from middle- and working-class families. Instead, they have created a permanent debtor class sold a false bill of goods by a greedy education system.

Democrats’ solution (as evidenced during the Biden administration) is to simply “forgive” the debt – i.e., have the taxpayers pick up the tab. But that will only exacerbate the current perverse incentive structure. The only viable solution is to turn off the federal money spigot that is allowing universities to effectively scam students – most of them high school seniors with little real-life experience or understanding of what they are signing up for.

Although the story has suddenly exploded across the media in recent days, the new rule is not actually new. The Department of Education finalized the regulation on June 29 and formally published it on July 1. Most of its major provisions take effect July 1, 2027.

But with the midterm elections just around the corner, the corporate media is looking for any excuse to attack Trump and Republicans. Thus, we’re seeing a coordinated outrage campaign over the administration supposedly attacking arts and humanities programs.

The New Republic, for instance, reported that Trump has moved “to cut off student loans for tons of degrees.” Wisconsin Public Radio warned that “social workers, artists, [and] early childhood education teachers will be affected.” The Washington Post described the Trump administration’s action as “gutting aid,” while Fortune framed the rule as a direct attack on music and the arts.

But as the Journal noted back in July, government estimates indicate that only 1.2 percent of bachelor’s programs and four percent of master’s programs will fail the earnings test. The Education Department is hardly targeting entire swaths of degrees. What the administration is doing is sending a message that academia must be subject to the same rules as every other industry, and that taxpayers will no longer be unwitting co-conspirators in universities’ schemes to rip off their students.